Is Unemployment Getting Better?

Last week it was announced that late November unemployment dropped. In the last post, I discussed seasonal adjustments. Unemployment actually grew, but the theory is that seasonal deviations have to be accounted for, so the rate was listed as declining.

Mike Mish provides the following charts on seasonal unemployment adjustments in January:

Above, the red line shows the adjusted figures and the blue line the unadjusted figures. The red adjusted line is less volatile and smooths out unemployment.

January unadjusted unemployment since 2003 is always higher than the adjusted figure. However, the past 2 years have seen an increasingly wider difference.

What can we surmise?

The significant drop in the seasonally adjusted figure (red) is substantial and not within the norm of previous drops. It is an impressive drop. This could mean the economy is rapidly improving, or there is something in the numbers that are taking us down an unusual path. Record numbers are long term unemployed.

We really aren't going to be able to tell what is really going on until we see what happens to the unadjusted blue line in the coming months, especially when a tradional bottom hits in May (the gap between red and blue). The last blue line (unadjusted) figures that increased that much was during a very large rise in unemployment. No wonder the markets are confused.